Correlation Between Expedia and Li Ning
Can any of the company-specific risk be diversified away by investing in both Expedia and Li Ning at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Expedia and Li Ning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Expedia Group and Li Ning Company, you can compare the effects of market volatilities on Expedia and Li Ning and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Expedia with a short position of Li Ning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expedia and Li Ning.
Diversification Opportunities for Expedia and Li Ning
Good diversification
The 3 months correlation between Expedia and LNLB is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Expedia Group and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company and Expedia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Expedia Group are associated (or correlated) with Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of Expedia i.e., Expedia and Li Ning go up and down completely randomly.
Pair Corralation between Expedia and Li Ning
Assuming the 90 days trading horizon Expedia Group is expected to generate 0.62 times more return on investment than Li Ning. However, Expedia Group is 1.6 times less risky than Li Ning. It trades about 0.07 of its potential returns per unit of risk. Li Ning Company is currently generating about -0.02 per unit of risk. If you would invest 8,880 in Expedia Group on September 27, 2024 and sell it today you would earn a total of 8,772 from holding Expedia Group or generate 98.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Expedia Group vs. Li Ning Company
Performance |
| Timeline |
| Expedia Group |
| Li Ning Company |
Expedia and Li Ning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Expedia and Li Ning
The main advantage of trading using opposite Expedia and Li Ning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expedia position performs unexpectedly, Li Ning can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Li Ning will offset losses from the drop in Li Ning's long position.| Expedia vs. Booking Holdings | Expedia vs. ANTA Sports Products | Expedia vs. Li Ning Company | Expedia vs. Shimano |
| Li Ning vs. Booking Holdings | Li Ning vs. ANTA Sports Products | Li Ning vs. Expedia Group | Li Ning vs. Shimano |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.
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